SUPREME COURT OF NEW JERSEY

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2 BE000011B SUPREME COURT OF NEW JERSEY No. A-122 THE HILLS DEVELOPMENT COMPANY, PIaintiff/Respondent v. THE TOWNSHIP OF BERNARDS in the COUNTY OF SOMERSET, a municipal corporation of the State of New Jersey, THE TOWNSHIP COMMITTEE OF THE TOWNSHIP OF BERNARDS, THE PLANNING BOARD OF THE TOWNSHIP OF BERNARDS and the SEWERAGE AUTHORITY OF THE TOWNSHIP OF BERNARDS Defendants/Appel 1 ants ON APPEAL FROM AN INTERLOCUTORY ORDER OF THE SUPERIOR COURT OF NEW JERSEY LAW DIVISION, SOMERSET/OCEAN COUNTIES Docket No. L P.W. CIVIL ACTION (MOUNT LAUREL II) SAT BELOW: Honorable Eugene D. Serpentelli, A.J.S.C. BRIEF OF RESPONDENT - THE HILLS DEVELOPMENT COMPANY BRENER, WALLACK & HILL 2-4 Chambers Street Princeton, New Jersey (609) Attorneys for Plaintiff/Respondent The Hills Development Company On the Briaf: Henry A. Hill, Esq. Thomas F. Carroll, Esq. Guliet D. Hirsch, Esq.

3 TABLE OF CONTENTS Page Table of Authorities Procedural History/Statement of Facts Standard of Review Argument L6 POINT I THE TRIAL COURT DID NOT ABUSE ITS DISCRETION WHEN IT DENIED BERNARDS t MOriON TO TRANSFER TO THE COUNCIL ON AFFORDABLE HOUSING 16 (a) Notwithstanding the legislative intent to transfer certain cases to the Council, transfer may be unconstitutional in all cases to which 16(a) of the Fair Housing Act pertains 18 (b) In analyzing whether manifest injustice would result upon transfer, the courts must consider the interests of lower income people 20 (c) The trial court's opinion/ the manifest injustice analysis 23 (d) Compulsory exhaustion of administrtive remedies in this matter would result in manifest injustice to Hills and lower income people 25 (e) Retroactive application of the Fair Housing Act to this litigation would result in manifest injustice to Hills and lower income people 32 POINT H THE DEFENDANT TOWNSHIP SHOULD BE ESTOPPED FROM TRANSFERRING THIS MATTER TO THE COUNCIL ON AFFORDABLE HOUSING AND/OR REPEALING THE ZONING APPLICABLE TO HILLS 1 PROPERTY 38 POINT ffl THE BUILDER'S REMEDY MORATORIUM PROVISION OF THE FAIR HOUSING ACT IS NOT APPLICABLE TO THE MATTER. SUB JUDICE 42

4 POINT IV VARIOUS PROVISIONS OF THE FAIR HOUSING ACT ARE FACIALLY INVALID 44 (a) The definition of region 44 (b) Standards for adjusting municipal fair share 46 (1) Reductions based on existing housing stock and for drastic alteration to local community 47 (2) Reductions for inadequate public facilities and infrastructure 47 (3) Credits 49 POINT V (c) Settlement 49 THE MORATORIUM ON THE AWARD OF BUILDER'S REMEDIES AND THE PRECLUSION OF THE AWARD OF BUILDERS REMEDIES BY THE COUNCIL ARE UNCONSTITUTIONAL 51 (a) The builder's remedy moratorium 51 (b) TTie preclusion of builder's remedies from the Council 53 POINT VI VARIOUS ASPECTS OF THE ADMINISTRATIVE PROCESS PURSUANT TO THE FAIR HOUSING ACT MUST BE CLARIFIED IN ORDER TO ASSURE A CONSTITUTIONALLY EXPEDIENT PROCESS 55 (a) Description of administrative process 55 (b) Ambiguities or conflicts which must be resolved to preserve effectiveness of the administrative process 56 (1) Participation by plaintiffs in transferred cases 56 (2) Appellate jurisdiction 57 (3) Time limit for administrative review 58 Conclusion 60

5 Page New Jersey Civil Service Association v. State, 88 N (1982) 31 N.3. Sports Exposition Auth. v. McCrane, 61 N.3. 1 (1972) Oakwood at Madison, Inc. v. Tp. of Madison, 72 N (1977) 1,44 Palisades Properties, Inc. v. Brunetti, 44 N (1965) Reed Development Corp. v. Parsippany-Troy Hills Tp., 10 N (1952) Roadway Express, Inc. v. Kingsley, 37 NUL 136 (1962) 27, 28 29, 32 Rothman v. Rothman, 65 N (1974) 34, 31 Southern Burlington County N.A.A.C.P. v. Tp. of Mount Laurel. 67 N (1975) , 45, 49 Southern Burlington County N.A.A.C.P. v. Tp. of Mount Laurel, 92 N (1983) passim U.S.A. Chamber of Commerce v. State, 89 NLX 131 (1982) 52 Usery v. Turner Elkhorn Mining Co., 428 U ^ 1 (1976) 34 Weinstein v. Investor Savings, 154 N.3. Super. 164 (App. Div. 1977) Statutes Fair Housing Act, U 1985, c. 222 passim N.3.S.A. 40:55D-49 and 52 7 N.3.S.A. 40:55D N.3.S.A. 40:55D N.3.S.A. 40:55D N.3.S.A. 40:55D N.3.S.A. 52:14B-10(c). ^ -a-

6 TABLE OF AUTHORITIES Page Cases Ahto v. Weaver, 39 N^ 418 (1963) Baldwin Const, Co. v. Essex Cty. Bd of Taxation, 24 N.J. Super. 252 (Law Div. 1952), aff d 27 N.J. Super. 240 (App. Div. 1953). Berkley Condo. Association v. Berkley Condo. Residences, 185 N.J. Super. 313 (Ch. Div. 1982) Clark v. Clark, 84 N.J. Super. 35 (Ch. Div. 196») af f d o.b. 44 N.J. 550 (1965) Dept. of Environmental Protection v. Ventron Corp., 94 f U 473 (1983) Divan Builders v. Planning Bd. Tp. of Wayne, 66 N.J. 582 (1975) Durgin v. Brown, 37 I U 189 (1962). Ferguson v. Skrupa, 372 US^ 726 (1963). Gibbons v. Gibbons, 86 N^ 515 (1981) Gitomer v. United States Casualty Co., 140 N.J. Eq. 531 (Ch. 1947) Gruber v. Mayor and Tp. Com, of Raritan Tp., 39 N.J. 1 (1962).. Healy v. Billias, 17 N.J. Super. 119 (App. Div. 1951) Hill v. Bd. of Adjust, of Eatontown, 122 N.J. Super. 156 (App. Div. 1972) Hodgson v. Applegate, 31 N^ 29 (1959) J.W. Field Co., Inc. v. Tp. of Franklin,, N.J. Super. (Law. Div. 1985) Kinsman v. Finnerty, 198 N.J. Super. 14 (App. Div. 1985)... Matawan v. Monmouth County Tax Board, 51 N.J. 291 (1968).. Morris County Fair Housing Council v. Boon ton Tp., 197 N.J. Super. 359 (Law Div. 1984)... Morris County Fair Housing Council v. Tp. of Boonton, et al (and consolidated cases) No. L P.W. et al, (Morris/Middlesex October 28, 1985) , 3* 39 18, 32 33, , , 50 passim -I-

7 PROCEDURAL HISTORY/STATEMENT OF FACTS Plaintiff, The Hills Development Company ("Hills") and its predecessor in interest have been engaged in exclusionary zoning litigation with the Township of Bernards ("Bernards") since March 11, Two lawsuits have been filed. The First Mount Laurel Suit The Allan-Deane Corporation, Hills' predecessor in title to approximately 1,150 acres of land located in Bernards Township, filed exclusionary zoning litigation against Bernards on March 11, (Pa51). The zoning at that time permitted only single-family, detached dwellings on three (3) acre lots on the subject property. The residential uses permitted in the entire Township were characterized in this action as exclusionary and in violation of Southern Burlington County N.A.A.C.P. v. Tp. of Mount Laurel, 67 N^ 151 (1975) ("Mount Laurel I"). (Pa62 to Pa64). This action, together with a companion law suit initiated against the Township of Bedminster by the Allan-Deane Corporation 1 involving contiguous property in Bedminster, was assigned to Judge Leahy in late Following the issuance by Judge Leahy of his final opinion on the Bedminster litigation, Bernards and Allan-Deane entered into settlement discussions. These discussions resulted in a settlement incorporated in both a letter agreement dated February 1, 1980 (Pa82) and a judgment dated March 18, 1980 (Pa90). The settlement which formed the basis of that judgment addressed itself to the "least cost" principles articulated in Oakwood at Madison, Inc. v. Tp. of Madison, 72 N.J. 481 (1977). The settlement did not provide for mandatory set-asides or other mechanisms designed to produce lower income housing. (Pa85; Pa93). 1 The Allan-Deane Corporation presently holds a fifty percent (50%) interest in Hills, a joint venture general partnership. -1-

8 Other Authorities R. 1:10-5 R. 2:5-5(6) R. 4:69-5 N.3.A.C. 1:i Hill, Government Manipulation of Land Values to Build Affordable Housing: The Issue of Compensating Benefits, 13 Real Estate L.J. 3 (1984) Mallach, From Mount Laurel to Molehill: Blueprint for Delay, N.J. Reporter (October, 1985) Sutherland, Statutory Construction, (4th Ed.) , 26, in-

9 The 1980 settlement basically provided that that portion of the Hills' property which was located in the Raritan Basin, stipulated to be. 501 acres, would be sewered by Allan-Deane through a sewer treatment plant to be built in Bedminster Township. The same sewer plant would also serve the Bedminster development, also located in the Raritan watershed. This portion of the Hills' Bernards property would be rezoned to permit 1,002 housing units, or two units per acre. The remainder of the Bernards property, consisting of 545 acres within the Passaic watershed, would not be sewered and would be zoned for 273 units or one unit for every two acres. (Pa93). On December 20, 1980 the property in Bernards and Bedminster was conveyed to The Hills Development Company pursuant to a joint venture agreement under which Allan-Deane retained a 50% interest in The Hills Development Company. The Age of the Case Issue In the fifth count of the complaint initiating the present action, (filed May 8, 1984) (Pa98), Hills alleges that, during the period beginning on March 17, 1980 and ending on May 8, 1984, Bernards violated the terms of the 1980 Judgment in numerous respects. (Pal 19 to Pal 21). These allegations have not been proved since this matter has not gone to trial. 2 They are called to this Court's attention at this time only because Hills believes that some of the litigants, whose cases have been 2 For the purposes of this interlocutory appeal, Hills takes the position, and is prepared to prove, that Bernards repeatedly and deliberately violated the terms of the 1980 settlement which violations effectively prevented Hills from developing portions of its Bernards property. Rather than revive the old law suit by way of an attempt to enforce litigant's rights pursuant to R.I: 10-5, Hills initiated new litigation under Mount Laurel II because of uncertainty with respect to the issue of whether the courts would enforce a settlement which did not ensure construction of lower income housing. Such a settlement (without lower income housing) had been reached in 1980 in the Bedminster litigation. However, the Public Advocate had appealed and Hills had been required upon remand of that case to Judge Serpent elli to build 20% lower income housing. The first 260 lower income units, completed this past summer, were reported to be the first Mount Laurel units occupied in this State. -2-

10 certified upon appeal, will attempt to convince this Court that it should adopt some sort of a bright line test in considering the meaning of "manifest injustice" on applications to transfer to the Council on Affordable Housing which test would heavily emphasize the age of the case. Hills takes the position that it should be permitted to prove that this action should properly be docketed as beginning on March 11, 1976 and not May 8, 1984 for the purpose of applying any such test. In other words, Hills contends that its controversy with Bernards is almost an adolescent and by no means a mere toddler. Mount Laurel II and the Second Complaint After January 20, 1983, when this Court issued its opinion in Southern Burlington County N.A.A.C.P. v. Tp. of Mount Laurel, 92 N^ 158 (1983) ("Mount Laurel II"), it became clear that the settlement entered into between Allan-Deane and Bernards and other rezonings which had occurred in Bernarcfe would not benefit Bernards because of the low densities permitted by Bernards and the Township's failure to assure the construction of any lower income housing. Bernards advised Hills and other developers that it intended to meet its Mount Laurel II obligation by amending its then-extant ordinances to require 20% mandatory set-asides for lower income housing without any density increases whatsoever.** In effect, Bernards abrogated the parties' apparent settlement. After due deliberation, Hills offered to 3 Based on this Court's language in that portion of the Mount Laurel II opinion addressing the facts of the Round Valley v. Tp. of Clinton case, Hills took the position that densities of less than three units per acre were insufficient to require mandatory set-asides per se and that, therefore, Bernards' attempt to require a setaside without a compensating density benefit at a two unit per acre density was illegal. See also Hill, Government Manipulation of Land Values to Build Affordable Housing: The Issue of Compensating Benefits, 13 Real Estate L.J. 3 (1984) for extended discussion of this issue. -3-

11 build approximately 1,160 lower income units (a 20% set aside) provided that its densities were increased to nine units per acre in the Raritan Basin portion of Hills' land and five and one-half units per acre in Hills' Passaic Basin land. (Pa74). When this offer was refused, Hills filed its second Mount Laurel complaint. As indicated, Hills' second complaint was filed on May 8, (Pa98). Pursuant to this Court's opinion in Mount Laurel H, Hills alleged that Bernards' land use ordinances did not provide a realistic opportunity for the Township's fair share of the regional need for lower income housing. (Pal 01 to Pal03). Also pursuant to Mount Laurel II, Hills alleged entitlement to a "builder's remedy" in the form of a proposed development of which twenty percent (20%) of the units would be affordable to lower income households. (Pal 05 to Pal 06). Finally, the fifth count of the May 8, 1984 complaint referred to Bernards' effective abrogation of the parties' prior settlement of the litigation. (Pal 19 to Pal 21). The Bernards land use ordinance challenged in the May 8, 1984 complaint was in obvious non-compliance with the principles articulated in the Mount Laurel II opinion. In resisting Hills' June, 1984 motion for summary judgment of constitutional invalidity, Bernards raised certain factual assertions. The trial court denied Hills' summary judgment motion but Bernards was specifically advised by the court that its assertions exposed the Township to a claim of "bad faith" liability pursuant to R. 4:46-5. (Pa79 to Pa81). Shortly thereafter, Bernards contacted Hills and offered to settle this litigation. (Pal39; Pal28 to Pal29). In August of 1984, Bernards offered to rezone the Raritan Basin portion of Hills' property at a density of 5.5 dwelling units per acre with twenty percent (20%) of the development, or 550 units, to be affordable to low and moderate income households. (Ibid). Bernards' proposal did not offer any density increase on the Passaic Basin portion of Hills' property which was, and is, zoned for one dwelling unit per two acres. (Ibid). Hills' principals were thereafter advised of Bernards' offer. -4-

12 Although the Bernards offer delivered a far lower density than that requested in Hills' complaint, the principals of Hills decided that, in a settlement context, Bernards' offer should be accepted. (Pal 28 to Pal 29). Commencing on September 18, 1984 (Pal57), Bernards attempted to acquire from the trial court "immunity" from further builder's remedy lawsuits. 4 Bernards transmitted to the trial court a second proposed immunity order on October 10, (Pal59). By letter dated October 16, 1984 (Pal60), the trial court indicated that said proposed immunity order could not be entered. Counsel for Bernards was advised by the trial court: I have your letter of October 10, 1984 which enclosed a proposed order. The procedure being followed is not in accordance with my normal approach to granting immunity to builder's remedy suits. I have previously been agreeable to granting immunity from builder's remedy suits if the township will stipulate the present invalidity of its ordinance and its fair share number. The order as submitted merely delays the interim process for 45 days while the township attempts to resolve the matter. I do not believe that that is a healthy practice in Mount Laurel litigation given the procedure which I am willing to follow. I will be happy to confer with all counsel concerning the matter at your earliest convenience. (Pal60). (emphasis added). (See also Opinion below at 26 (Pa26) wherein court indicates that entry of an immunity order was originally declined due to lack of adequate stipulation). 4 The trial court had developed a practice of entering orders which effectively immunized municipalities from additional builder's remedy lawsuits in return for a municipal pledge to voluntarily comply with the Mount Laurel mandate. Most commonly, such immunity orders have reflected a municipality's stipulation of the constitutional invalidity of its ordinance and the grant of a 90 day period in which to adopt a constitutional ordinance. Thus, in return for a pledge to voluntarily comply, municipalities could avoid the perceived problems which result from multiple builder's remedy lawsuits. For example, in the Township of Franklin (Somerset County), eleven builder-plaintiffs have filed builder's remedy lawsuits. J.W. Field Co., Inc. v. Tp. of Franklin, N.J. Super. (Law Div. 1985) (Docket No. L P.W., decided January 3, 1985), slip op. at 1. For a discussion of the rationale underlying such immunity orders and the prerequisites for their entry, see, jid. slip op. at 8 to

13 On November 12, 1984, Bernards adopted Ordinance 704 (Pal61), its response to the Mount Laurel mandate. Pursuant to the parties' agreement to settle, Ordinance 704 rezoned the Raritan Basin portion of Hills' property to permit an inclusionary development which would provide for 550 units of lower income housing. (Pal61; Pal28). In reliance on the zoning provided by Ordinance 704, Mount Laurel II and the law established pursuant to that decision, Hills commenced a series of "planning and pre-start" activities in order to begin the process of development. These activities, more fully described at Point II, include: reconstruction of a road designed to serve Hills' inclusionary developments in Bernards and Bedminster Townships; expansion of a sewage treatment plant; arrangements for mortgaging the Bernards tract so as to acquire construction financing; preparation and submission of a $325, development application; and an application for an enlarged water storage tank sized to serve the proposed inclusionary development. (Pal32 to Pal34. Pal96 to Pal99). Under cover of letter of November 23, 1984 (Pal65), a revised proposed immunity order (Pal68) was submitted by Bernards to the trial court. Said proposed order indicated that Bernards had revised its ordinances so as to provide for over 1,000 units of lower income housing. Due to the trial court's finding of adequate stipulation of ordinance invalidity (Pa26), the immunity order was entered on December 19, 1984 (Pal68). Said order immunized Bernards from further builder's remedy lawsuits for a period of 90 days in order to give the parties a period of time in which to finalize their settlement. (Pal69). The order also appointed a Master whose charge was to review Ordinance 704, report to the court as to its compliance, and assist the parties in resolving any outstanding issues. (Ibid). Finally, the December 19, 1984 immunity order stayed further prosecution of the instant litigation for a period of 90 days. Since Bernards had offered to settle this matter and, in fact, rezoned Hills' property for an inclusionary development, -6-

14 Hills did not contest the request for a stay of this litigation. Due to this litigation stay and the fact that the issues in this matter have been resolved by way of stipulation, no active litigation occurred in this matter between December 19, 1984 and Bernards' decision to abrogate the parties' settlement and seek transfer of this matter to the Council on Affordable Housing. Naturally, if Bernards had not represented its decision to voluntarily comply and settle this litigation, the instant litigation would have proceeded for the past eleven months and it is quite possible that a judgment of compliance would now be entered.^ Following the entry of the December 19, 1984 immunity Order, the parties and the court-appointed Master met for the purpose of discussing cost-generative provisions remaining in the Bernards land use ordinance, design standards, "fast track" approval provisions, fee waivers for lower income units, off-tract improvements, sewer-related issues and the drafting of settlement documents. (Pal29 to Pal31; Pal48 to Pal51).6 5 In addition to the representations made to the trial court in this litigation, additional representations were made by Bernards Township in an action involving Spring Ridge Associates and Bernards Township which action was heard by the trial court in the Spring of In that action, Bernards took the position that, in order to come into compliance with Mount Laurel, it needed to assess a mandatory setaside against the Spring Ridge Development of some 150 moderate income units without any compensatory density increase, although this development had been approved and was under construction prior to the attempted imposition of that requirement. The developer took the position that his prior approvals vested his rights to build pursuant to N.J.S.A. 40:55D-49 and 52 and that mandatory set-asides without compensatory density or other benefits were illegal. A settlement was reached with respect to this litigation under which the developer was allowed to proceed without changing his plans and Bernards would receive a 141 lower income unit credit toward its fair share obligation in recognition of its expressed good faith and diligence in seeking Mount Laurel compliance. (Pa27; Pa203 to Pa204); See also fn. 3, supra. 6 As to the items which were negotiated, it should be noted that the courtappointed Master largely concurred with Hills' positions. (Pa218 to Pa224, Master's Report). At the compliance hearing which was to be held in this matter on November 18, 1985, the trial court would have determined whether Ordinance 704 should be revised as per some or all of the Master's recommendations. 7

15 In April of 1985, it appeared that all differences could not be resolved prior to the April 30, 1985 expiration date of the immunity order. Bernards contacted the court below, again assuring the court that this matter was near settlement and that a continuation of immunity and the litigation stay was justified. The trial court then entered an Order, on April 29,1985, continuing the immunity and litigation stay until May 15, (Pal71). Additional discussions involving the Master and the parties 1 representatives thereafter ensued. It again appeared that the matter could not be completely resolved prior to the expiration of immunity (May 15, 1985). Another application for an extension of immunity was therefore presented to the trial court. By way of letter dated May 13, 1985, the court granted the request for an additional extension of immunity (until June 15, 1985) but with the "express understanding that no further extension will be granted." (Pal 74). As of June 5, 1985, all outstanding issues were resolved and the parties' representatives commenced the process of finalizing settlement documents. (Pal75; Pal 43). As June 15, 1985 approached, it once again appeared that this matter could not be fully resolved prior to the expiration of immunity (June 15, 1985). Therefore, on June 12, 1985, counsel for Bernards wrote to the trial court (Pal 75) and represented to the court: The parties in the above mentioned matter have arrived at an agreement to settle and conclude the above matter. Additionally, the Township has been working with George Raymond [the court-appointed Master] on all aspects of the Township's compliance package, and we believe we have reached an understanding which is satisfactory to Mr. Raymond and the municipality. I am in the process of drafting a proposed order and judgment which will be satisfactory to the parties and the Court. The drafting of the proposed judgment has proved difficult. It is my understanding that this process, including the drafting of the judgment, has delayed the filing of George Raymond's report, although Mr. Raymond has indicated to me thaf he expects to have his report filed by the end of this week. -8-

16 I respectfully request that the Court schedule a hearing date to review the proposed settlement and compliance package in order to dispose of the action and bring the matter to a conclusion. I would expect to submit all reports and documentation necessary for the Court's review well in advance of the hearing date. I would also respectfully request that the Order dated April 29, 1985 which was supplemented by the Courts letter dated May 13, 1985 be extended until such hearing date and until the matter is finally disposed of by the Court. Both my adversary and Mr. Raymond have indicated to me that they concur with this request. (Pal75). (emphasis added) Based on the Township's representation that the matter was settled, Hills requested the Tax Court to dismiss litigation Hills had filed against Bernards, since the underlying reason for the dispute would be rendered moot by the settlement. (Pal32;Pal44). During the month of July, 1985, additional meetings were held. Throughout this process, the Master and representatives from Bernards and Hills worked diligently to finalize the drafting of specific sections of the Memorandum of Agreement and proposed form of Order of Judgment which were being prepared by Township counsel. A revised, proposed form of Order of Judgment and Memorandum of Agreement were transmitted to Hills by Township counsel on July 3, Redrafted documents, acceptable to Hills, were returned to Bernards' counsel. (Pal43 to Pal45). On August 7, 1985, Hills once again met with Bernards' counsel. At this meeting, exceedingly minor wording changes were made to the settlement documents. As far as those present at this meeting were concerned, all drafting issues were now resolved and the documents could be put in final form and presented to the Township Committee. 7 (Pal45). * The details of the process of drafting the various Stipulations of Settlement, Memoranda of Agreement and proposed form of Order of Judgment are set forth at length in the Affidavit of Thomas J. Hall, Esq. (Pal42 to Pal46). -9-

17 On August 12, 1985, some 40 days subsequent to the effective date of the Fair Housing Act, Bernards' counsel telephoned counsel for Hills and advised that the Township Committee refused to sign settlement documents concerning the agreement as negotiated. (Pal45). Bernards' counsel further advised that the Committee intended to explore its options pursuant to the Fair Housing Act. (L. 1985, c. 222). (Pal45 to Pal46). Bernards' counsel indicated that he was instructed to seek a lower number of units to be built by Hills. Implicit in the discourse was the notion that, should Hills refuse to accept a "new offer," Bernards would file a motion seeking transfer to the Council on Affordable Housing as per 16 of the Fair Housing Act. (Pal46). On September 13, 1985, Hills was served with Defendant Bernards Township's motion to transfer to the Council on Affordable Housing. The court below heard oral argument on Bernards' motion to transfer, and Hills' cross-motion for a judgment of compliance, on October 4, Following lengthy oral argument on transfer motions brought by Bernarcb and two other municipalities, the court delivered an oral opinion denying Bernards' motion to transfer. (Pal to Pa44). On October 16, 1985, the trial court entered an Order memorializing its denial of the Township's motion to transfer. (Pa45). By way of correspondence dated October 28, 1985, the trial court advised that a compliance hearing would be held on November 18, (Pal77). The trial court did not anticipate that the compliance hearing would require more than one day of testimony. (Pal 86). 8 Bernards' Law Division motion for a stay of all trial court proceedings (i.e. the compliance hearing) was argued on November 1, 1985 and denied on that date. (Pal79). The trial court did grant Bernards' request for an additional extension of builder's remedy immunity. (Pal92 to Pal93). 8 As discussed infra, the parties have stipulated that Bernards' Ordinance 704 complies with Mount Laurel II. The Master recommends court approval with relatively minor revisions. -10-

18 Another application for a stay of the compliance hearing was then brought by Bernards in the Appellate Division. The Appellate Division granted Bernards' request for a stay on November 12, (Pa47). On the evening of November 12, Bernards Township Committee introduced an ordinance (Ordinance 746) (Pal94) which would divest Hills of the development rights to which it would be entitled upon approval of its pending development application.^ On November 13, 1985, Hills filed an application with this Court to dissolve the stay so that the scheduled compliance hearing could be held. This Court denied Hills' request (Pa48) and certified Bernards' leave to appeal the trial court's denial of transfer while said appeal was pending unheard. (Pa49 to Pa50). Finally, Hills has been compelled to file a motion to enjoin Bernards from adopting the aforementioned Ordinance 746. As indicated, this ordinance would have amended the Bernards land use ordinance in a manner which would have divested Hills of the development rights it would receive pursuant to Bernards' present ordinances and approval of Hills' pending development application. The trial court enjoined the adoption of any such amendment insofar as such an amendment would affect Hills' pending development application (Pa226 to Pa228). During the course of argument on said motion, counsel for Defendants candidly advised the trial court that Bernards may wish to alter the zoning which presently provides for Hills' inclusionary development if it can have its fair share obligation decreased in another forum. (Pa228). 9 On October 17, 1985, a comprehensive "Conceptual Approval Application" was submitted to the Defendant Planning Board for review. This Application, including the requisite $74, application fee, was prepared at a cost of approximately $325, (Pal95 to Pa200). -11-

19 Present Status of Matter/The Fair Share Issue Of the many municipalities requesting transfer to the Council on Affordable Housing, no municipality is closer to compliance than Bernards Township. Hills and Bernards have stipulated that Bernards' compliance ordinance, Ordinance 704, complies with Mount Laurel II. (Pa29). The Master has recommended a judgment of compliance with certain relatively minor conditions. (Pa29; Pa219). Prior to imposition of the aforementioned stay, this matter was scheduled for a oneday compliance hearing on November 18, 1985 (Pal77) and notice of said hearing was duly published. (Pal 78). As indicated above, Bernards has enjoyed immunity from builder's remedies for almost a full year. In the latter part of 1984, Bernards stipulated the constitutional invalidity of its prior ordinance and its fair share obligation. Bernards represented its desire to voluntarily comply and, to that end, Bernards rezoned certain tracts of land for inclusionary developments including a portion of Hills' tract. Hills took Bernards at its word and did not contest Bernards' receipt of the extraordinary relief awarded to the Township. On the eve of the final resolution of this matter, Bernards seeks transfer so that it can acquire the lower fair share it perceives to be available pursuant to the terms of the Fair Housing Act. Pursuant to the currently accepted fair share methodology, the "Consensus'VAMG methodology, Bernards' "gross" fair share obligation has been calculated to be 1,509 units of lower income housing. (Master's Report at 2, Pa203). Indeed, as of March 29, 1985, Bernards' own consultant calculated the Township's "gross" fair share obligation to be 1,525 units pursuant to the above-described methodology. (Pa236 to Pa237). In the context of settlement, the Master recommended that the trial court grant Bernards some 670 "credits" toward its total fair share obligation. These credits include a 20% reduction for voluntary settlement -12-

20 and the aforementioned 141 unit credit which represented the set-aside obligation Bernards originally sought to impose following approval of the Spring Ridge development. (Pa203 to Pa204). The Master also recommended an additional 141 unit credit due to the existence of a 'Section 8" senior citizen project and Bernards' efforts toward compliance with Mount Laurel I. (Pa211 to Pa212). Thus, of a "gross" fair share obligation stipulated to be greater than 1,500 units, Bernards has been given the opportunity to receive a judgment of compliance by allowing for new construction of only 839 units of lower income housing. (Pa205). Notwithstanding the exceptionally fair treatment recommended by the Master, Bernards has asserted that the Fair Housing Act will allow Bernards to acquire a lower fair share obligation than that heretofore available to Bernards. The Fair Housing Act does not set forth a fair share methodology. In fact, as the trial court noted (Pal82 to Pal83; Pal87 to Pal91), it does not appear that the Council will ever devise a fair share methodology. The Act does envision Council promulgation of "criteria and guidelines" pursuant to which municipalities will calculate their own fair share obligations. Fair Housing Act, 7(c). However, an attempt to calculate a fair share obligation as per the Act at this time is no more than an exercise in clairvoyance. Regardless, if Bernards' consultant is correct in his predictions and the Act provides for fair share obligations dramatically lower than those heretofore calculated, the Act is unconstitutional and no case should be transferred. Therefore, Hills respectfully submits that Bernards' principle justification for transfer, i.e. acquisition of a lower fair share obligation, should carry no weight when this Court evaluates the trial court's denial of transfer. In light of the fact that the status of this matter is as advanced as a case can be without having a judgment of compliance entered,10 Hills respectfully submits that transfer was quite properly denied. 10 Again, the trial court has stated that this matter can be concluded by a compliance hearing which he estimates will require no more than one day (Pal86). -13-

21 STANDARD OF REVIEW This Honorable Court has requested that the parties to this appeal brief the issue of the appropriate standard of review of the trial courts' determination of the manifest injustice issue. As a preliminary matter, Hills respectfully submits that it may be unconstitutional to transfer any 16(a) case. (See discussion at Point I(b)). While Hills does not believe that this question need be reached in the matter sub judice, this inquiry is a question of law and, if this Court should find that no 16(a) case may be constitutionally transferred, the issue of the appropriate standard of review for findings of "manifest injustice" in individual cases does not arise. Should this Court hold that certain cases may be transferred, Hills respectfully submits that the appropriate standard of review is whether the trial courts abused their discretion in denying transfer of those cases retained by the courts. In Hills' view, the most closely analogous "standard of review" principles are those governing appellate review of trial courts' findings concerning circumstances under which relief from exhaustion of administrative remedies is justified. Where trial courts are called upon to determine whether it is manifest that the interests of justice require such relief, discretion is accorded the trial courts and there is "no rigid formula..." Durgin v. Brown, 37 N.J. 189, 203 (1962). Where matters are addressed to the sound discretion of the trial courts, the trial courts' findings should be upheld if an abuse of that discretion is not apparent. Hodgson v. Applegate, 31 N.J. 29, 37 (1959). If a matter falls within the area of judicial discretion, appellate courts will not interfere with the result unless the trial court's exercise of discretion would itself result in manifest injustice. Healy v. Billias, 17 N.J. Super. 119, 122 (App. Div. 1951). Thus, Hills respectfully submits that the trial court's finding that -14-

22 transfer would result in manifest injustice should not be disturbed unless it appears that said finding would itself result in manifest injustice to Bernards, ue. an abuse of discretion. Defendant Bernards has asserted below that the trial court made the following erroneous conclusions of law: (1) the trial court erroneously considered the interests of lower income people when evaluating transfer; and (2) the trial court erroneously found that it would be manifestly unjust to transfer this case for lengthy administrative proceedings where the case could be resolved in court expeditiously. In Hills' view, Bernards' asserted errors of law are entirely without merit (see discussion infra.) However, assuming arguendo that an error of law was made by the trial court, Hills respectfully submits that, under any reasonable interpretation and application of the 16(a) standard, the record amply supports a finding of "manifest injustice" upon transfer. Naturally, if this Court should set forth 16(a) transfer guidelines other than those utilized below, this Court must rule on whether the record is presently sufficient to decide the transfer issue pursuant to those guidelines. If the record is not sufficient it would appear that this matter would have to be remanded. -15-

23 POINT I THE TRIAL COURT DID NOT ABUSE ITS DISCRETION WHEN IT DENIED BERNARDS* MOTION TO TRANSFER TO THE COUNCIL ON AFFORDABLE HOUSING. Pursuant to 16(a) of the Fair Housing Act, L. 1985, c. 222, Defendant Township of Bernards filed a motion seeking transfer of this matter to the Council on Affordable Housing ("the Council"). The trial court determined that transfer would result in "manifest injustice" and the trial court therefore denied Bernards' motion to transfer. (Pa41; Pa45). The trial court also scheduled a compliance hearing in this matter for November 18, (Pal77). Hills and Bernards have stipulated that Bernards' revised land use ordinance (Ordinance 704) complies with the principles of Southern Burlington County N.A.A.C.P. v. Tp. of Mount Laurel, 92 N.J. 158 (1983) ("Mount Laurel II"). (Pa29).U Therefore, the trial court envisioned that the compliance hearing would require no more than one day of testimony. (Pal86). However, Bernards requested that the Appellate Division stay the compliance hearing and said stay was issued. This Honorable Court has sustained the stay and certified pending unheard the issue of transfer. The Hills respectfully submits that this is the very type of lawsuit which may not be lawfully and/or constitutionally transferred. In fact, Hills submits that the facts of this case compel a conclusion that Bernards should be estopped from acquiring a transfer. (See Point II, infra). In short, the Legislature did not intend that this matter be transferred, our Constitution would not permit it, and the trial court did not abuse its discretion when it found that manifest injustice would result upon transfer. 11 Bernards actually seems to assert that Ordinance 704 is "too compliant" in that Bernards seems to believe that transfer would allow the Township to acquire a lower fair share obligation pursuant to the provisions of the Fair Housing Act, and, thereafter, down-zone the Hills property. As discussed supra, in order to accomplish this objective, Bernards has attempted to delete an ordinance provision which would vest Hills' inclusionary development rights upon approval of Hills' pending development application. (Pal 94). -16-

24 The Legislature clearly intended that certain cases be transferred to the Council while others should be retained by the courts. The authorization to transfer jurisdiction over pending and future cases is contained in 16 of the Act. Two classes of litigation are recognized and treated separately in 16: cases filed more than sixty (60) days before the effective date of the Act and cases filed after that cut-off date. As to the first class of cases, the Act provides: For those exclusionary zoning cases instituted more than 60 days before the effective date of this act, any party to the litigation may file a motion with the court to seek a transfer of the case to the council. In determining whether or not to transfer, the court shall consider whether or not the transfer would result in a manifest injustice to any party to the litigation. If the municipality fails to file a housing element and fair share plan with the council within five months from the date of transfer, or promulgation of criteria and guidelines by the council pursuant to section 7 of this act, whichever occurs later, jurisdiction shall revert to the court. L. 1985, c. 222, S16(a) (emphasis added). (The "a" does not appear in the official reprint of the portion of the Act preceding 16(b). This appears to be an omission which occurred during printing). All cases which fall in the second class will be considered by the Council through a mandatory request by a plaintiff for "review and mediation" unless the municipality has not complied with S9(a) of the Act. (S16(b)). With respect to cases filed more than sixty (60) days before the Act became effective, transfer is not automatic; the parties have an option to request a transfer, and the court must consider the relative equities of the request. See Morris County Fair Housing Council v. Tp. of Boonton, et al (and cases consolidated for argument), No. L P.W. et al, (Morris/Middlesex, October 28, 1985), slip op. at (hereinafter cited as "MCFHC"). Thus, the Legislature's general preference for resolving "existing and future disputes" through the Council's review and mediation process ( 3) must be interpreted in light of the system for transfer set up by

25 if,-'. '"' \ (a) Notwithstanding the legislative intent to transfer certain cases to the Council, transfer may be unconstitutional in all cases to which Sl6(a) of the Fair Housing Act pertains. Defendant Bernards has argued below that, if the trial courts' analysis of the transfer issue is applied, few if any cases will be transferred to the Council. This, Bernards asserts, would be a result which is contrary to the legislative intent to transfer certain cases. However, notwithstanding the legislative intent, it may be unconstitutional to transfer any of the cases which fall into the 16(a) category. In other words, the legislative intent to transfer certain cases may be inconsistent with the Constitution, Section 16(a) of the Act envisions that the legislation will be applied retroactively to certain pending litigation. As discussed in detail at Point I(e), where the Legislature has declared a preference for retroactive application, judicial inquiry will be made into whether manifest injustice or constitutional (i.e. due process) violations would result from such retroactive application. See e.g. Dept. of Environmental Protection v. Ventron Corp., 94 N.J. 473, 498, 499 (1983). Thus, even if the Legislature had declared that all cases be transferred, constitutional considerations would demand that our courts analyze whether such legislative intent may be honored. In other words, despite the legislative intent set forth in 16(«) of the Act, it may be unconstitutional to transfer any "old" cases to the Council. Similar considerations underly analysis of instances in which the Legislature seeks to compel exhaustion of administrative remedies. As per 15 of the Act, a transferred litigant would presumably be compelled to undergo "mediation and review" before the Council. (See discussion infra). Pursuant to It. 4:69-5, litigants bringing actions in lieu of prerogative writs need not exhaust administrative remedies if "it is manifest that the interest of justice requires otherwise." As discussed below, the case law holds that, in certain instances, the Legislature may not constitutionally -18-

26 compel exhaustion of administrative remedies. With particular reference to the constitutional rights at issue, this Court has expressly stated its intolerance for continued delay of the vindication of those rights. See e.g. Mount Laurel II, 92 N.J. at The trial courts have thoroughly analyzed the delay which would attend transfer. Opinion below at (Pal6 to Pa22); MCFHC, supra, slip op. at Pursuant to the trial courts' "best case" scenarios, it is very unlikely that a transferred case could be administratively "resolved" prior to September 1, Conversely, it is extremely likely that the courts would be able to finally resolve any "old" litigation within a year at most. The vast majority of "old" cases are within three months of judicial resolution. The Act is silent on the right of transferred litigants to assert entitlement to the builder's remedy to which this Court held a builder-plaintiff may be entitled.13 Therefore, at best, a transferred litigant would be subjected to substantial delay of resolution of the dispute. At worst, a transferred builder-plaintiff would undergo such delay only to find that it is, y ultimately powerless to assert entitlement to a remedy. Under such circumstances, it may indeed,be unconstitutional to require any 16(a) litigant to exhaust administrative remedies as per the Fair Housing Act. See MCFHC, supra, slip op. at 60 and reported decisions cited therein. ' '?! ' 'j if 12 Hills adopts and supports both trial courts' analyses of the time frame envisioned for Council action on transferred cases. However, Hills takes the position that, since the Council is not empowered to grant builder's remedies (see Point V, infra), very few, if any, cases^ban be expected to be resolved before the Council. Therefore, the effect of transfer will simply be to delay judicial resolution of controversies for two or more years. See Mallach, From Mount Laurel to Molehill: Blueprint for Delay, N.J. Reporter (October, 1985) at 26. (Pa229). Cases which will be "resolved" in the Council will likely be limited to those where plaintiff-builders abandon their claims _due to expiration of options, excessive costs, loss of market or other reasons. In such ^jnstan^es, municipalities will be free to engage in "camouflage zoning" of unbuildable areas. 13 "See further discussion on this issue infra. -19-

27 In sum, constitutional principles may prevent fulfillment of the legislative intent to transfer certain cases to the Council. In Hills' view, the issue need not be reached in the matter sub judice since application of the 16(a) standard compels a conclusion that this matter should not be transferred. However, Hills respectfully submits that the apparent legislative intent to transfer certain cases should be given little or no weight when this Court decides which, if any, of the cases before it may be constitutionally transferred. (b) In analyzing whether manifest injustice would result upon transfer, the courts must consider the interests of lower income people. Defendant Bernards has asserted that the trial courts erroneously considered the interests of lower income people. In analyzing whether the trial courts appropriately concluded that manifest injustice would result from transfer, a threshold inquiry is the identification of the interests to be considered. As discussed, the courts are directed by the Act to "consider whether or not the transfer would result in a manifest injustice to any party to the litigation." A literal reading of 16(a) does not limit a court's inquiry to manifest injustice to a party. Courts are merely directed to "consider 11 same. The pertinent legislative history indicates that the Legislature did not intend to limit a court's inquiry to manifest injustice to a party. Prior to amendment, the transfer provision had read: For those exclusionary zoning cases instituted more than 60 days before the effective date of this act, no exhaustion of the review and mediation procedures established in this act shall be required unless the court determines that a transfer of the case is likely to facilitate and expedite the provision of a realistic opportunity for low and moderate income housing. (emphasis added). Thereafter, the section was amended to its final form. Legislative history indicates that the intent of the change was to: [Elstablish that a court in determining whether to transfer pending lawsuits to the council must consider whether or not a manifest injustice to a party to the suit would result, and not -20-

28 just whether or not the provision of low and moderate income housing would be expedited by the transfer^ (February 28, 1985 Assembly Municipal Government Committee Statement to Senate Bill No. 2046/2334 at H 5). (emphasis added). It would seem, therefore, that the the Legislature intended that expedition of production of lower income housing should be considered upon a motion to transfer. Pursuant to this reading of the legislative history, manifest injustice to a party would be an additional consideration distinct from that of expedition of lower income housing.14 However, it is arguable that the Legislature intended that the inquiry be limited to manifest injustice to a party. See MCFHC, supra, slip op. at 44 n.14. Assuming that the courts' analysis is confined to manifest injustice to a party, the question of law presented is whether analysis of manifest injustice to a "party" upon transfer may include an analysis of manifest injustice to the lower income people intended to benefit from the Mount Laurel doctrine and the Fair Housing Act. Again, the legislative history evinces an intent to encourage courts to consider expedition of production of lower income housing. However, even if the legislative history of the Act did not evince a clear intent to encourage judicial review of the interests of lower income households, an analysis of manifest injustice to lower income households would nevertheless be constitutionally mandated. A legislative provision which did not consider the constitutional rights at issue would be unconstitutional. Since courts are obligated to read legislation in a manner which is consonant with the Constitution, Ahto v. Weaver, 39 N.J. 418, 428 (1963), 16(a) must be read to permit analysis of the constitutional rights of lower income people. 14 Bernards has asserted below that the trial court erroneously revived the standard removed from 16(a) and "rewrote" the legislation so as to restrict the transfer of cases to the Council. The trial court did neither. As indicated above, the legislative history indicates that the change in wording of 16 was due to the desire to have courts consider manifest injustice to a party in the traditional sense in addition to whether transfer would facilitate production of lower income housing. -21-